Development levies

Background

The Government intends to replace development contributions with a new development levies system. This is part of Pillar 2 of the Going for Housing Growth programme which aims to improve how infrastructure is funded to support housing and urban growth in the new, more flexible system

The objective of the Going for Housing Growth programme is to improve housing affordability by significantly increasing the supply of developable land for housing, both inside and at the edge of our urban areas.

The development levies system will provide councils and water organisations with increased flexibility to charge developers for the overall cost of growth infrastructure across an urban area which will address issues with under-recovery.

Read the Government press release

What is a development levy?

A development levy is a charge on a development to help pay for the infrastructure needed to support growth. Infrastructure services leviable under the new development levies system include water supply, wastewater, stormwater, transport, reserves, and community infrastructure.

Under the proposed system, charges would reflect expected growth and the aggregate forecast cost of providing infrastructure capacity to that growth across a defined levy area. The purpose is to ensure developers pay a proportionate share of the long-term capital cost of servicing growth. Separate levies would be calculated for each of the six infrastructure services.

Going for Housing Growth - infrastructure funding and financing tools

In February 2025 the Government announced decisions on the second stage of the Going for Housing Growth programme (GFHG). The decisions included:

Replacing development contributions with a development levies system
Making changes to improve the Infrastructure Funding and Financing (IFF) Act
Improving the flexibility of targeted rates for growth infrastructure.

Supporting Growth Through a Development Levies System

The Government sought feedback on a partial exposure draft of the Local Government (Infrastructure Funding) Amendment Bill to implement the development levies system and on proposed regulations which will underpin implementation.

See the draft Local Government (Infrastructure Funding) Amendment Bill (PDF, 327KB)

The underlying policy for the Bill and proposals for regulations were outlined in the consultation document:

Going for Housing Growth: Supporting Growth Through a Development Levies System (PDF, 918KB)

Submissions

Between 28 November 2025 and 20 February 2026 the Ministry of Housing and Urban Development and the Department of Internal Affairs (now part of the Ministry for Cities, Environment, Regions and Transport), sought written submissions on the proposals raised in the consultation document which related primarily to the draft Bill.

You can read the full summary of submissions below.

Going for Housing Growth: Supporting Growth Through a Development Levies System - Summary of Submissions (PDF, 1.6MB)

Summary of submissions: Key points (PDF, 590KB)

What the submissions said

We received 56 submissions from councils, developers, industry groups, Māori housing organisations and individuals. 

Councils strongly supported replacing development contributions, mainly because the current system does not fully recover growth costs. 
Developers’ views were mixed; some supported greater national consistency and transparency, while others raised concerns about over-charging.

The strongest feedback focused on four areas: 

how levy areas should be defined
the need for more detail on how levies should be calculated 
whether levies should recover costs beyond 10 year long term plans
how the system should transition from development contributions.

Government decisions in response to submissions

Officials carefully analysed all submissions and identified where changes or refinements were needed to improve fairness, workability, and transparency.

Key decisions in response to feedback include:

requirement for councils to set separate levy areas where there is substantial variation in forecast infrastructure costs between development locations
removal of high-cost overlays
requiring core Crown agencies and Crown entities to pay development levies
giving councils and water organisations discretion on phasing in any price increases
giving councils and water organisations discretion on implementation of development levies between the time the Commerce Commission issues a levy calculation methodology and 2030
the methodological detail on time value of money treatment will be determined in secondary legislation
progressing changes to improve transparency, including public disclosure of development agreements with non-standard levy charges.

Changes to levy areas

Legislation will provide direction for councils to set separate levy areas where there is substantial variation in forecast infrastructure costs between development locations. This is a different approach from the exposure draft bill, which was based on councils setting broad levy areas with discretion to set high-cost overlays.

The aim of having a small number of levy areas is to achieve greater certainty of price differentiation within a council's district. This will encourage efficient growth by incentivising development in locations where enabling infrastructure costs are lower.

Crown paying development levies

Requiring the Crown to pay development levies establishes a consistent approach across public and private development and ensures those who generate costs pay their fair share. It also provides for predictable and transparent funding and planning signals.

To support the transition to all Crown paying development levies, Health New Zealand and the New Zealand School Property Agency will be exempt from development contributions during the transition to the new development levies system.

Role of the Commerce Commission as development levies regulator

Cabinet has agreed that the Commerce Commission will be the independent regulator for the development levies system. This is intended to build trust and confidence across councils, developers, and communities.

The Commerce Commission will:

set detailed methodologies for the calculation of development levies
monitor operation of the system using an information disclosure regime
be able to set additional requirements or rules
have a compliance and enforcement role.

Timeline and process for levy calculation methodology

The Commerce Commission will produce the detailed methodological requirements for calculating development levies.

The Commerce Commission began work on the methodologies in mid-2026 and will begin formal consultation on a draft proposal after the Bill passes in late 2027.

The Commerce Commission will be required to publish the first detailed development levy calculation methodologies within nine months of Royal assent of the Bill.

Opportunities for further input

The Local Government (Infrastructure Funding) Amendment Bill (the Bill) is being prepared for introduction in the first quarter of 2027.

There will be further opportunities for stakeholder input, including:

consultation on the calculation methodologies and disclosure requirements; and
a select committee process once the Bill is introduced.

Further information

Technical questions and answers

Development levies system: technical questions and answers

Contact us

If you have any questions regarding development levies, please email development.levies@mcert.govt.nz.